Andy Harrison

Dear Shareholder

When I wrote to you last year, we had just started the process of recruiting a new Chief Executive Officer. I am pleased that we were able to appoint Nick Wilkinson in February 2018. Nick brings an excellent retail skill-set with multi-channel experience across a number of consumer sectors and geographies. He has made an excellent start and is working well with the rest of the Board and the Executive team.

Shortly after Nick joined, we announced that Keith Down, our Chief Financial Officer, had decided to step down from the Board, to take up a role closer to his family home. I would like to thank Keith for his contribution and commitment to Dunelm.

We have appointed Laura Carr to succeed Keith as Chief Financial Officer, and she will start with us in November. Laura brings a breadth of business and finance experience with multi-national and consumer facing businesses, and I look forward to working with her.

To support the Board and the Executive team during the transition from Keith to Laura, David Stead, Dunelm's former CFO, has served as Interim CFO. I would like to thank David for coming out of retirement to support us during this period.

As I mentioned last year, Simon Emeny retired at the AGM in November 2017, after serving ten years as a Non-Executive Director, latterly as Senior Independent Director and Chair of the Remuneration Committee. Liz Doherty has succeeded Simon as Senior Independent Director, and William Reeve has taken the role of Chair of the Remuneration Committee.

As planned, we were also pleased to appoint an additional Non-Executive Director, Rachel Osborne, in April. Unfortunately, Rachel subsequently changed her executive role which created a competitive conflict and she stood down from the Board in August. We have initiated a search for Rachel's replacement and will update on progress in due course. I thank Rachel for her contribution over her short tenure.

Whilst there have been a number of changes to the Board over the year, we have maintained a core Board team of Will Adderley, Liz Doherty, William Reeve, Peter Ruis, Marion Sears and myself, all of whom have served at least three years on the Board. I thank all my colleagues for their continued support and commitment, and the time given to help with the appointment and induction of my newer colleagues.

Externally, the Government and regulators have continued to focus on the need to strengthen corporate governance and requiring companies to demonstrate higher standards of corporate behaviour and to fully recognise their obligations to all of their stakeholders. As I have written in previous years, good governance is an integral part of our corporate culture, and our business principles encompass a commitment to take long term decisions and to treat our customers, colleagues, suppliers and communities with equal respect, as key stakeholders in our business.

We have reviewed the Financial Conduct Authority's revisions to the Corporate Governance Code, and whilst it is not yet in force, we have implemented some of its recommendations. Marion Sears, who has been on the Board since the Group's flotation in 2006, has agreed to act as the "Designated Non-Executive Director" for our colleagues. She has

attended two meetings of our National Colleague Council and reported back to the Board. In November 2018, members of the Colleague Council will meet with the Board to communicate their views. We have also reviewed how we engage with our other stakeholders, and details are set out in this report. Finally, we have looked at how the Board is monitoring the culture of the business and tabled an annual Board review of these.

In January 2018, we held one of our regular Corporate Governance meetings, attended by Will Adderley, the Non-Executive Directors, the Company Secretary and myself, to which our major institutional shareholders were invited. There was a useful exchange of views on a variety of governance topics, and we intend to repeat this regularly.

In the last two years our annual Board effectiveness review was facilitated by an external third party. This year I conducted an internal review, focused mainly on how we manage succession and Board and Committee effectiveness going forward. Further details are set out in the report below.

At our AGM this year, as usual, all Directors will be seeking reappointment. In addition, in accordance with the Listing Rules, each of the Non-Executive Directors will also be subject to a vote of shareholders independent of the Adderley family.

I look forward to meeting shareholders at the AGM.

Yours sincerely,

Andy Harrison Chairman

12 September 2018